The Stock Report

Last week, I told you that I would not be surprised to see the indices re-test the lows. This week, I want to reiterate that another 10% lower could be seen in this market. Certainly, my hope is investors have seen the bottom, but no one knows for sure.

This past week was very tough. The indices were all down by more than 6%, on average. A lot of investors are deeply worried that the market could move much, much lower. I am still not in that camp. When blood is running in the street (and, currently, it is overflowing), the contrarian in me wants to buy, buy, buy.

Buying in the face of a falling market is just not easy to do for anyone. But, buying is what I plan to do.

This next week, my investment strategy will likely be as follows:

• Strong Bull Market bias, while noting that the market is likely in a very uncomfortable bottoming action with massive amounts of volatility.
• Leg in to positions by buying no more than 10% at a time when the market begins showing strength. I may buy into weakness, as well. This means I may find opportunities to buy when the markets drop 150 to 250 points.
• Concentrate on diversification and high-quality stocks that only have to move half way back to their 52-week highs to double in price.
  

Above all, you should know that the sell-off this past week has not caused me to panic; nor should it cause you to panic in my opinion. Patience is the key right now. The sell-off on Friday afternoon was probably more a factor of big hedge funds raising cash than anything else. Hopefully, that sell-off won't continue Monday morning.

Sure... anyone can make the case that global and domestic economies are in a recession and that recession could be deeper and longer than feared. So, if enough people believe the worst is yet to come, the worst is, indeed, in front of us. But, other than the big hedge funds pushing the market around this week, I found it strangely comforting that, for the most part, the market shook off one piece of bad news after another. One sign of a market bottom is when bad news does not push the market lower.

There was lots of bad news this week, but nothing amazingly bad came on Friday afternoon. So, I look at the Friday sell-off as nothing more than some profit-taking by big players. I am apprehensive, but very optimistic about our opportunities to make huge gains in the very near term. Remember, the market will see a major move upward 6-8 months before the economy sees a recovery.

It is also important to remember that it always looks the worst at the bottom. Now is not the time to give up or to panic. Now is the time to keep a calm, cool head and look for opportunities to buy some of the greatest companies in the world at prices no one has seen in decades. I want to be ready to capitalize on what I hope to be a massive move up in the market to the 10,000 level. I certainly do not want to be sitting on cash when that move happens. And, I suspect that when it starts, it will only take a matter of hours or days... not weeks, to rocket 1,500 to 2,000 points higher. The key is to already have great positions sitting in the portfolio when that move comes.

This means that the Dow could be trading back in the 10,500 to 11,000 range within the next few months. Of course, all of this is pure conjecture, based on my analysis of historical market patterns of the Dow. I am making a huge assumption that history will repeat itself. But, right now, I am reasonably content with being a net buyer in this market; always with an eye on the exit, but willing to suffer some unrealized losses while I pick up cheaper and cheaper stocks in anticipation of a dramatic rebound of the market.

The Bull/Bear Rating for this coming week is back to its most Bearish stance of [ - 5 ], down from [ - 3 ] last week. The ratio of Bull-to-Bear signals this week is an incredible 21-to-1 in favor of the Bears! But... take a look at the far right side of the Counter Cyclical Market Trend chart. It continues to point to a market recovery with the Composite Index showing that the bottom has been put in and the likelihood of a market recovery is reasonably high. Even as the Dow Index moves lower, the Composite Index is moving higher. The purpose of this chart is to "Forecast" the future. This is a strong indication that the future is looking to improve.

Bull/Bear Forecast For the Upcoming Week

The Bull/Bear Rating provides a one-week directional signal on the market, with [-5] being the most Bearish and a [+5] being the most Bullish. The TurnerTrends Counter Cyclical Market Forecast Chart estimates the near-term direction of the market from a contrarian perspective. The red line (New Short Sell Index) shows a technical direction and the degree of strength of Bearishness. The black line (Composite Index) is the combined impact of both the new Short Sell Signals and the New Buy Signals and is an indication of the degree of oversold or overbought condition of the market. Buying opportunities exist when the Composite Index is moving higher. Market bottoms are represented by a change in direction of the Composite Index from moving lower to moving higher. Market corrections are projected when the Composite Index crosses the Short Sell Index, which is an indication of an overbought market. The market is represented by the light gray shaded area which shows the relative month-to-month gain or loss of the Dow.

Stay strong... stay calm... stay optimistic... and, above all, have a great week in the market!

Mike Turner, President
TurnerTrends, Inc.
www.turnertrends.com and www.sabinalcapital.com